Source (click to view full story): MoneyWeekJust over a decade ago, Indonesia was considered "a basket-case", says The Economist. It faced economic collapse after the Asian crisis hammered companies overexposed to foreign-currency debt and caused the banking system to implode. Meanwhile, political chaos also appeared on the cards.
But now Indonesia has become a "stable, largely peaceful" democracy. It is also widely seen as an extra 'I' in the Bric (Brazil, Russia, India and China) group of fast-growing emerging markets. Along with rising global risk appetite, this helps explain why the Jakarta Composite index is Asia's best-performing market this year, up 123% in dollar terms.
Indonesia is helped by the fact that, unlike in most Asian countries, growth is propelled largely by domestic demand – exports comprise just 25% of GDP. This appears to be picking up again, with bank loans up 14.6% year-on-year in July. Sound management over the past few years has also put the economy on a more solid footing.
Keeping a tight lid on spending has helped lower debt quickly: public debt has fallen from 80% in 1999 to just over 30% by the end of last year. Companies have trimmed borrowings too: corporate debt is down from almost 50% of GDP to 15%. Lower debt has also reduced interest rates across the economy, cutting the cost of borrowing to invest.
That bodes well for the long term, and there are further reasons for optimism. Indonesia is resource-rich, with exports including palm oil, cocoa, coffee, coal and oil….
